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Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy

  • Larry D. Qiu
  • Barbara J. Spencer

This paper considers the implications of relationship-specific investment within keiretsu for policies aimed at opening the Japanese market for intermediate goods, such as auto parts. Both VIEs applied to parts and VERs restricting Japanese exports of autos cause the keiretsu to import a wider range of parts, but of a relatively unimportant type, such as seat covers. Since keiretsu investment and output fall, the total value of U.S. parts exports may actually fall. For a given value of these exports, a VIE is less costly for U.S. consumers and Japanese producers, but a VER is preferred by U.S. automakers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8279.

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Date of creation: May 2001
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Publication status: published as Qiu, Larry D. and Barbara J. Spencer. "Keiretsu And Relationship-Specific Investment: Implications For Market-Opening Trade Policy," Journal of International Economics, 2002, v57(1,Oct), 49-79.
Handle: RePEc:nbr:nberwo:8279
Note: ITI
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